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Markets May Be Underestimating Threats To The Global Economy

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http://www.theguardian.com/business/2014/apr/02/financial-markets-risks-to-global-economy-nouriel-roubini

The world's economic, financial, and geopolitical risks are shifting. Some risks now have a lower probability – even if they are not fully extinguished. Others are becoming more likely and important.

A year or two ago, six main risks stood at centre stage:

• A eurozone breakup (including a Greek exit and loss of access to capital markets for Italy and/or Spain).

• A fiscal crisis in the United States (owing to further political fights over the debt ceiling and another government shutdown).

• A public-debt crisis in Japan (as the combination of recession, deflation, and high deficits drove up the debt/GDP ratio).

• Deflation in many advanced economies.

• War between Israel and Iran over alleged Iranian nuclear proliferation.

• A wider breakdown of regional order in the Middle East.

These risks have now been reduced. Thanks to European Central Bank president Mario Draghi's "whatever it takes" speech, new financial facilities to stabilise distressed sovereign debtors, and the beginning of a banking union, the eurozone is no longer on the verge of collapse. In the US, President Barack Obama and Congressional Republicans have for now agreed on a truce to avoid the threat of another government shutdown over the need to raise the debt ceiling.

In Japan, the first two "arrows" of prime minister Shinzo Abe's economic strategy – monetary easing and fiscal expansion – have boosted growth and stopped deflation. Now the third arrow of "Abenomics" – structural reforms – together with the start of long-term fiscal consolidation, could lead to debt stabilisation (though the economic impact of the coming consumption-tax hike is uncertain).

...

For starters, there is the risk of a hard landing in China. The rebalancing of growth away from fixed investment and toward private consumption is occurring too slowly, because every time annual GDP growth slows toward 7%, the authorities panic and double down on another round of credit-fueled capital investment. This then leads to more bad assets and non-performing loans, more excessive investment in real estate, infrastructure, and industrial capacity, and more public and private debt. By next year, there may be no road left down which to kick the can.

5 more risks at the link.

Seems he's decided to go back into doom mode, although not 100% convinced by his analysis as some of it appears interlinked ie FED unwinding / exit strategy and Emerging markets.

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http://www.theguardi...nouriel-roubini

5 more risks at the link.

Seems he's decided to go back into doom mode, although not 100% convinced by his analysis as some of it appears interlinked ie FED unwinding / exit strategy and Emerging markets.

Roubini, meh. Has he got another book out?

What he's saying basically is that he got it all wrong with his first six guesses, here's another five. And this after informing us in 2009 that - thanks to Gordon Brown's Keynesian intervention - the crisis was over.

He flip-flops more often than AEP.

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Translation: left wing prophets of doom at the Guardian were gleefully predicting that the whole financial system was going to come crashing down a couple of years ago, bringing down capitalism at the same time. Everyone sensible ignored them, none of it actually ended up happening, and now they apparently have a new set of apocalyptical 'predictions' that apparently the rest of the world is irresponsible for continuing to ignore.

If you predict the end of the world every year, eventually you will get it right by luck alone.

Edited by Smyth

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The markets just keep going up don't they and there seems little that can make them pause for thought let alone drop... let alone crash... but they are at crazy heights now... so now seems a good time to come out all bearish as there is just a chance that you will be prooved right... and gets lots of kudos... and appear on TV lots of time... and get loads of big bucks giving speechs about how you predicted the crash just right... if it happens...

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Translation: left wing prophets of doom at the Guardian were gleefully predicting that the whole financial system was going to come crashing down a couple of years ago, destroying capitalism with it. Everyone ignored them, unsurprisingly none of it actually happened, and now they apparently have a new set of apocalyptical 'predictions' that apparently the rest of the world is irresponsible for continuing to ignore.

The whole system DID come down. What we have now is a very, very long way from capitalism, especially in the state-bankrolled, bloated, and wildly inefficient banking sector.

(A utility service that grows faster than GDP is by definition inefficient)

If you predict the end of the world every year, eventually you will get it right by luck alone.

Indeed.

As another example, If you start with 1024 graduate bankers, and every year sack the 50% who perform worse than average, after 10 years your remaining banker will have beaten the market 10 years running. What does that tell you about their ability?

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The whole system DID come down. What we have now is a very, very long way from capitalism, especially in the state-bankrolled, bloated, and wildly inefficient banking sector.

(A utility service that grows faster than GDP is by definition inefficient)

To his eternal credit, at least Roubini saw the GFC coming. Unlike 30,000 professional economists and ten million bankers. B)

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As another example, If you start with 1024 graduate bankers, and every year sack the 50% who perform worse than average, after 10 years your remaining banker will have beaten the market 10 years running. What does that tell you about their ability?

Only guaranteed if the median graduate banker always outperforms the market.

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Only guaranteed if the median graduate banker always outperforms the market.

Probably should have been 'peers'.

The real fun is when you have a smaller cull level (say bottom 25%) with replacement, doesn't take long to have a set of people who are all clearly doing better than the average, even if all they are doing is tossing coins..

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Translation: left wing prophets of doom at the Guardian were gleefully predicting that the whole financial system was going to come crashing down a couple of years ago, bringing down capitalism at the same time

An outcome only prevented by massive socialist intervention in the markets via QE ect. So in reality it is the triumph of socialism, not capitalism that you are celebrating here.

Admittedly it was socialism for the rich- but the principle is the same- when the invisible hand came knocking on their door the 'free market' capitalists went running home to mother State and begged for a bailout.

So no- the massive taxpayer rescue of the system was not-as you seem to think- Capitalism's finest hour. :lol:

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